For Insurers, A Daunting Task Ahead — Making Reform Work

Insurers face a daunting task now that the U.S. Supreme Court has declared the health reform act constitutional — creating a market that delivers affordable coverage to millions more people while meeting a slew of new mandates and continuing to underwrite quality medical care.

In some ways, it's as massive a task as private insurers such as Aetna and Cigna would have faced if the law had been overturned.

But Thursday's historic decision allows the companies to stay on the course they've been following for more than two years, planning for and adapting to the laws. So it's a relief for the insurers, as it is for doctors and hospitals who no longer have to change strategies put in place since the law passed.

Now, the job is managing a law that contains provisions many of these very same people once fought.

Further complicating matters, many states have put off implementing reform until the Court decided the case. Those states have wide latitude in deciding how they establish their health exchanges — the online markets where people can shop for health insurance starting in 2014. As those states scramble to catch up, insurers must now tailor health plans to comply with 50 different sets of rules.

That's all the harder because the bulk of the new business will not come from large employers.

"What we need to do is make sure we don't unwind a lot of things that are working well for the larger employers, but rather we figure out how to take some things that are working positively and leverage them for the individual market and the small employer," Cigna CEO David Cordani said in an interview after the decision.

In exchange for agreeing to abide by stricter rules, the insurers benefit from the so-called individual mandate upheld Thursday by the Court, which requires virtually everyone to have health insurance by 2014. Striking down that key provision might have added cost, but it would not have changed the nature of private health insurance, people in the industry said.

"You can't legislate the actuarial math," said Keith Stover, a spokesman and lobbyist for the Connecticut Association of Health Plans, a health insurance trade group. "You can't legislate away the risk profile, the adverse selection, any more than you can legislate or litigate away the sun coming up tomorrow."

Taxes, Higher Premiums

Mandating insurance benefits and adding taxes to insurers, pharmaceutical companies and biotech manufacturers is certain to raise premiums, according to insurance executives.

"The law does increase the tax burden to corporations that are providing solutions," Cordani told The Courant. "So it provides an additional set of costs, which we don't think is helpful because there's an affordability challenge already."

Even though all 50 states will have exchanges, that doesn't mean every health insurer will sell plans in each state. Cigna's strategy is to sell in markets where the company sees potential for growth.

"We've not publicly laid out which states we would or would not be. We've been very actively monitoring how the market is going to unfold," Cordani said.

Half of Americans have health plans that don't include all the perks mandated by the federal government and called "essential benefits," Aetna's Chairman and CEO Mark T. Bertolini said Thursday in an interview on CNBC.

"This bill was not written well, and as a result, we have a number of things that will drive up premiums much more significantly than the average cost of healthcare," Bertolini said.

The law requires young, healthy people to pay more for health insurance than they would without the law, Bertolini said. The law broadens age ranges, lumping together larger groups of people and driving up premiums for younger people in order to lower premiums for older people.

"Until we get other underlying costs out of the system, the near-term effects of this bill will be much higher premiums in 2014 and 2015," Bertolini said on CNBC.

"We are prepared for the changes ahead and will continue to fully comply with the requirements of the Affordable Care Act. At the same time, we know that much more must be done to fix the problems that remain in our health care system," said Aetna spokeswoman Susan Millerick.

Sarah Yeager, a spokeswoman for Anthem Blue Cross and Blue Shield in Connecticut, the state's largest health insurer, said, "We look forward to working constructively with policymakers and other key stakeholders to build a health care delivery system that provides security and affordability to all Americans."

Key Provisions

In the days and weeks before the historic Court decision, insurers said they would continue many provisions of health reform, even if the law requiring them to do so were struck down — indicating that market forces, not just government mandates, are behind much of the law.